- Quant giant Two Sigma is launching a real-estate investing arm, Two Sigma Real Estate.
- It has spread into private investing with private equity, venture, and ESG funds.
- The CIO of the new unit will be former WeWork executive Rich Gomel.
- See more stories on Insider’s business page.
Two Sigma’s expansion into the private markets has added another arm.
Two Sigma Real Estate is the $58 billion quant giant’s newest unit and will be led by Tom Hill, the former Blackstone executive who joined Two Sigma in 2019 as a consultant, and Rich Gomel, a former managing director at WeWork who led the firm’s real-estate investment platform.
This is the fourth private investing business Two Sigma has built, and second since Hill joined the firm.
He told Insider in an interview that he was tasked with figuring out whether the firm’s systematic public-markets strategy could be applied in the private space.
“Taking data, modeling it, and then predicting what’s going to happen in the next hour, the next day, the next week,” Hill said, describing in simple terms the complex quant firm’s process. “Maybe you can look at longer-term signals that can predict three, four, five years out.”
The other private businesses at the quant manager, founded by the billionaires David Siegel and John Overdeck, include two units that predate Hill — private-equity arm Sightway Capital and a venture-capital branch — and Two Sigma Impact, which was launched last year. The four private businesses run a combined $3 billion. The firm also has a market-making arm.
Real-estate investing is a crowded space, of course, dominated by the likes of Hill’s former firm Blackstone, but he and Gomel believe the existing data infrastructure at Two Sigma — the dozens of data scientists and thousands of datasets — gives the venture a “headstart” on long-time players.
“It’s hard to do this, it’s incredibly costly to do this,” said Gomel, who joined Two Sigma Real Estate as its chief investment officer, of the firm’s data-science capabilities.
“There aren’t that many firms that have the infrastructure — in public or private markets — to do this. It creates a really high barrier to entry.”
The firm, which has hundreds of employees who hold doctorates, has more than 10,000 datasets that Gomel and Hill believe can be put to work in finding the best investments in real estate.
Drew Conway, who has been a senior vice president at Two Sigma since 2019, will be the head of data science for the unit, according to a press release, and there are five dedicated real-estate investors on Gomel’s team with plans to hire more.
“Some people and some places are trying to build this out, but Two Sigma is already there,” Hill said. He called real estate “ripe for innovation and advancements.”
“It’s rich in data but no one uses it,” he said. “The first-mover advantage is very significant.”
Data on migration, employment, and regional credit-card spending can be indicators of where a city or neighborhood’s rent is going, for example, Hill said. One project someone worked on recently was building an algorithm to predict which urban areas would get rent-control protections next and when, he said.
At first, the new arm will be looking at opportunities only in the US and Canada, but Hill expects to add Europe and Asia if the strategy proves successful.
The real estate arm has not yet fundraised on its own, but instead has invested capital from Two Sigma. Hill, who is the chairman of all four private-investing businesses, believes it’ll be a quick fundraise when the strategies prove successful thanks to the firm’s relationship with many large allocators.
“I’m quite confident firms will say ‘Let’s see if we can’t partner,'” he said.
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